Justin Trudeau wondered if the Prime Minister might stand now and—presumably having engaged in some deep reflection over the Christmas break—”abandon” the Canada Job Grant, but Mr. Harper had apparently not been so moved.

“This government remains absolutely committed to the notion that to address some of these problems, we need to get employers and institutions and individuals who are looking for work working together to fill jobs that can be filled,” the Prime Minister explained.

Notions (Jim Flaherty would separately describe the Job Grant today as a “concept“) are, or at least can be, rather great things. Much of governance and politics, at least in its public expression, is notional. ™And a lovely notion the Canada Job Grant is, everyone somehow coming together to make the world somehow better. Why wouldn’t the government remain so committed? Why wouldn’t we all be so committed? Why does Justin Trudeau hate the notion of cooperation leading to the gainful employment of his fellow countrymen? Why is Mr. Trudeau so afraid to dream?

It is a pity only that notions aren’t much more than daydreams unless someone can work out the details. Ten months ago, the Canada Job Grant was “a bold, new initiative” that “would transform the way Canadians receive training.” But as of this moment, it is still basically a notion, one that the provinces have rejected.

Which is not to say that one of the signature promises of last year’s budget has so far been a total loss.

“Mr. Speaker, let us be clear on this. The Canada Job Grant was the government’s signature economic policy of the last budget. It spent millions of taxpayer dollars on partisan ads boosting it, but it is a mess. It was rejected by the provinces. It will cost more and help fewer people,” Mr. Trudeau lamented.

Here the Liberal leader had simply refused to acknowledge one important element of the Canada Job Grant: the basic notion’s ability to cheer people up.

“Mr. Speaker, I noted that the Canada Job Grant was in fact very well received by those in the marketplace,” Mr. Harper enthused, “by people who want to upgrade their skills, want to receive more training, want to gain jobs and, by pluralism, want to create jobs.”

So apparently people who might like to receive a grant to upgrade their or someone else’s skills were, in fact, heartened to hear that they might receive a grant to upgrade their or someone else’s skills.

So there’s that. And presuming Jason Kenney figures out a way to make the notion into something tangible, the government will at least have an actual program to claim, even regardless of whether it angers the provinces or basically makes sense or does, in fact, work. At that point, presumably, the government can announce it again and the marketplace will be newly happy.

Of the general topic of the federal advertising budget, the NDP later sent up Mathieu Ravignat to grouse—it having been reported that the government had exceeded its planned envelope for Economic Action Plan™ promotion last year. (You will note in that story that the Globe is still clinging to the quaint notion that the Economic Action Plan™ was a “catchphrase” related to government efforts in regards to the recession. That might’ve seemed to be the idea in 2009, but it would now seem that the Economic Action Plan™ is what we used to call “the federal budget.”)

“Mr. Speaker,” the New Democrat wondered, “how much of our money is the current government going to waste?”

Tony Clement stood here to explain the government’s commitment to fulfilling its obligations.

“Mr. Speaker, the responsibility of any government is to communicate with the population on plans and priorities and policies that are actually passed by this Parliament,” Mr. Clement explained. “It is our obligation and indeed our pleasure to do so. Of course, we want to inform Canadians about the great economic policies that are found each year in the budgets, and we will do so again I am sure.”

It is an obligation that extends even to the government’s notions and concepts (Economic Action Notions™) It is their responsibility to bounce ideas off you.

Here though, presumably, is an answer to the Parliamentary Budget Officer’s quibbles about the lack of information so far provided to explain the state of the nation’s finances and the government’s spending reductions. The PBO need not fret, but simply wait patiently for the inevitable campaign that will explain at length and in detail precisely which expenditures have been eliminated or reduced, how and why and what impact such changes will have on the government’s ability to provide services and so on. An hour-long infomercial might be necessary. But we might forgive the government the expense.

]]>http://www.macleans.ca/authors/aaron-wherry/the-sketch-economic-action-notions/feed/9‘Parliament as defender of the public purse’http://www.macleans.ca/politics/ottawa/parliament-as-defender-of-the-public-purse/
http://www.macleans.ca/politics/ottawa/parliament-as-defender-of-the-public-purse/#commentsThu, 09 May 2013 03:29:35 +0000http://www2.macleans.ca/?p=381977Pierre Poilievre invokes the highest principle

Of the contents of the bills, one of the concerns is the section related to collective bargaining at the CBC and several other crown corporations. The CBC released a statement yesterday in response.

We support efforts to help Crown Corporations manage public resources responsibly. We believe that this initiative may have unintended consequences on the successful operation of some corporations. It is important that these consequences are understood and addressed.

We will be writing to the Government to share our concerns about C-60, and to request a meeting to ensure that Ministers have accurate information on CBC/Radio-Canada’s record, both at managing public resources and delivering on itsmandate.

The New Democrats, meanwhile, have tabled their proposal for splitting the bill. The motion was denied yesterday at the finance committee, but, for the record, here is what Peggy Nash proposed.

“That notwithstanding any Standing Order or usual practice of the House, that Bill C-60, An Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures be amended by removing the following clauses:

a) clauses 136 to154 related to the Investment Canada Act;b) clauses 161 to 166 related to the Immigration and Refugee Protection Act and the Temporary Foreign Worker Program;c) clauses 174 to 199 related to the proposed Department of Foreign Affairs, Trade and Development Act;d) clauses 213 to 224 related to the National Capital Act and the Department of Canadian Heritage Act;e) clauses 228 to 232 related to the Financial Administration Act and collective bargaining between Crown corporations and their employees;

That the clauses mentioned in section a) of this motion do compose Bill C-61; that Bill C-61 be deemed read a first time and be printed; that the order for second reading of the said bill provide for the referral to the Standing Committee on Industry, Science and Technology;

that the clauses mentioned in section b) of this motion do compose Bill C-62; that Bill C-62 be deemed read a first time and be printed; that the order for second reading of the said bill provide for the referral to the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities;

that the clauses mentioned in section c) of this motion do compose Bill C-63; that Bill C-63 be deemed read a first time and be printed; that the order for second reading of the said bill provide for the referral to the Standing Committee on Foreign Affairs and International Development;

that the clauses mentioned in section d) of this motion do compose Bill C-64; that Bill C-64 be deemed read a first time and be printed; that the order for second reading of the said bill provide for the referral to the Standing Committee on Canadian Heritage;

that the clauses mentioned in section e) of this motion do compose Bill C-65; that Bill C-65 be deemed read a first time and be printed; that the order for second reading of the said bill provide for the referral to the Standing Committee on Government Operations and Estimates;

that Bill C-60 retain the status on the Order Paper that it had prior to the adoption of this Order; that Bill C-60 be reprinted as amended; and that the Law Clerk and Parliamentary Counsel be authorized to make any technical changes or corrections as may be necessary to give effect to this motion.”

The Conservatives have said they would like different parts of the bill sent to different committees for study, but we don’t yet have the details of their proposal.

]]>OTTAWA – Finance Minister Jim Flaherty tabled a trimmed-down budget bill Monday that he promised would face the proper parliamentary scrutiny, but the official opposition says the legislation still needs to be chopped up.

The Conservatives faced intense criticism over their so-called “omnibus” budget bills last year, which were stuffed with a laundry list of policy measures, including controversial changes to environmental monitoring.

The NDP and the Liberals introduced more than 1,000 amendments to the 2012 bill to register dismay with both the process and the content.

This year’s version is more modest in length, and Flaherty promised that sections would be studied by different parliamentary committees.

“So we’ll have a minibus instead of an omnibus?” Flaherty joked to reporters after question period Monday.

But Flaherty did not acknowledge a link between the criticism last year and the shorter bill this year. This year’s legislation comes in at 125 pages, compared with 452 last year.

Another budget bill is expected later in the year to implement more of the government’s promised changes.

“We had a very large budget last year and we had to put a lot of legislation into the first budget bill and the second budget bill was substantial too,” Flaherty said.

“This is a smaller budget this year. As I said, we did a lot of the heavy lifting in the budget last year.”

NDP finance critic Peggy Nash said despite the shorter length, the budget legislation still qualifies as an omnibus bill because of the wide variety of measures it tackles.

Some of those items include:

— Changes to the Temporary Foreign Workers program that increase the lengths to which employers must go to find Canadian staff before they’re allowed to bring in foreign labour.

— The creation of a new department of Foreign Affairs, Trade and Development, incorporating the now defunct Canadian International Development Agency.

— Changes to the Investment Canada Act and how it reviews investments in Canada by foreign state-owned enterprises.

— The transfer of some duties away from the National Capital Commission to the Department of Canadian Heritage.

— Giving more power and oversight to the Treasury Board Secretariat over collective bargaining conducted by Crown corporations.

“It is once again an omnibus budget bill. We call it omnibus 3.0. It is a compilation of changes to two dozen different laws,” said Nash.

“We believe still that these omnibus budget bills should be broken up and introduced as separate pieces of legislation that can be studied by the appropriate committees.”

Flaherty is also warning of more job cuts in the federal public service.

“We have a lot of duplication of government services. And, as you know, we have a plan which has been set out in the last two budgets to reduce the size of our own spending by something less than five per cent,” said Flaherty, pointing to attrition as a source of cuts.

At the same time, the parliamentary budget officer’s latest report is warning that the government’s cuts will act as a drag on both job creation and economic growth.

The report predicted the government will announce an even bigger surplus — $3.7 billion rather than $800 million — in the critical 2015-16 year when the Harper government is to face the electorate in a fall vote.

]]>Here is Bill C-60, the first budget implementation act of the year.

At 125 pages—according to the page count on Adobe—it is the shortest budget bill tabled by the Conservatives since 2009, when that year’s second budget bill was 60 pages (the first budget bill tabled that year was 551 pages). It is still larger than all but three budget bills tabled between 1994 and 2005. See this short history of budget implementation acts for previous page totals.

After tabling the bill in the House, Jim Flaherty told reporters that the government will ask the finance committee to send certain parts of the bill to different committees for study.

The bill amends the Excise Tax Act, the Excise Act, 2001, the Customs Tariff, the Trust and Loan Companies Act, the Bank Act, the Insurance Companies Act, the Cooperative Credit Associations Act, the Federal-Provincial Fiscal Arrangements Act, the Canadian Securities Regulation Regime Transition Office Act, the Investment Canada Act, the Canada Pension Plan, the Pension Act, the War Veterans Allowance Act, the Immigration and Refugee Protection Act, the Citizenship Act, the Nuclear Safety and Control Act, the National Capital Act, the Department of Canadian Heritage Act, the National Holocaust Monument Act, the Salaries Act, the Parliament of Canada Act, the Department of Public Works and Government Services Act, the Financial Administration Act and the Keeping Canada’s Economy and Jobs Growing Act.

It also enacts the Department of Foreign Affairs, Trade and Development Act, which allows for the amalgamation of Foreign Affairs, International Trade and CIDA.

]]>http://www.macleans.ca/politics/ottawa/c-60-the-first-budget-implementation-act-of-2013/feed/2Tories to introduce latest budget bill, including changes to worker programhttp://www.macleans.ca/news/tories-to-introduce-latest-budget-bill-including-changes-to-worker-program/
http://www.macleans.ca/news/tories-to-introduce-latest-budget-bill-including-changes-to-worker-program/#respondMon, 29 Apr 2013 17:59:15 +0000http://www2.macleans.ca/?p=378348OTTAWA – The Conservatives are set to introduce legislation today to implement their 2013 budget.
The bill will include changes to the temporary foreign workers program already outlined in the…

]]>OTTAWA – The Conservatives are set to introduce legislation today to implement their 2013 budget.

The bill will include changes to the temporary foreign workers program already outlined in the budget, which was unveiled last month.

The Tories have been musing about overhauling the program for over a year, but their work has taken on greater urgency amid growing concerns the system is being abused.

Most recently, the Royal Bank of Canada came under fire for using a supplier whose foreign workers allowed the bank to cut Canadian jobs.

Last year, a mining company was able to bring in Chinese labour for a B.C. project after insisting that the ability to speak Mandarin was an essential part of the job.

In 2012, some 213,516 people entered Canada via the temporary foreign worker program, more than three times the number admitted a decade ago.

Put another way, the private sector brought in 25 per cent more foreign labourers last year than the number of economic immigrants accepted by the government, which has long insisted caps on its own programs are needed to prevent flooding the Canadian labour market.

The changes to the temporary foreign worker program outlined in the budget include increasing the lengths to which employers must go to find Canadians before they’ll be able to bring in foreign labour.

The government also wants reliance on temporary labour to be temporary in and of itself, looking for employers to have a plan to how they’ll eventually transition to a more Canadian workforce.

“While the Temporary Foreign Worker Program was created to fill temporary shortages, an increasing number of employers appear to be using TFWs to address long-term, structural labour gaps,” the government observed in a briefing paper on the issue earlier this year.

The government is also looking to charge employers a fee to bring in foreign labour rather than have the government absorb the cost of the program.

The government spends approximately $35.5 million per year processing applications, at a cost of approximately $342 per application, Human Resources and Skills Development Canada told a pre-budget briefing earlier this year.

Opposition politicians have argued that the growth and alleged abuse of the program pokes holes in the Conservative government’s claim to have created thousands of jobs in Canada since the 2008 recession.

Much of the government’s latest budget, released in March, focused on job creation, with millions being allocated by training and job creation programs.

The 2013 budget says total spending, including debt-servicing charges, will rise to $282.6 billion this year.

Meanwhile, direct program expenses — which exclude major transfers to other levels of government — are projected to plunge almost $4 billion this year and another $2.5 billion in 2014-15.

But the financial plan was light on what’s exactly getting cut and how the new programs will be structured, stoking fears that the pending budget implementation legislation will be another omnibus budget bill.

The last two budget bills passed by the Conservative government created controversy by including dozens of measures not explicitly contained within the budget, including major changes to environmental regulation in Canada.

Both prompted marathon voting sessions in the Commons after opposition parties introduced hundreds of amendments to the bills in a bid to remove some of the more contentious elements.

]]>While the Finance Minister will table the first budget implementation act of the year later today, the Parliamentary Budget Officer has released a new report on the impact of this year’s budget.

The PBO’s latest estimates on the impact of the 2013 budget handed down in March show the cumulative impact will be to reduce economic growth by 0.12 per cent and job creation by 14,000 by 2016. Combining the latest budget measures with the cutbacks unveiled in 2012 means there will be 62,000 fewer jobs in 2016, rising to 67,000 fewer in 2017, than might otherwise be the case without the cuts.

The PBO cautions the estimates do not mean the cutbacks will result in a loss of jobs, but that employment will be lower than it might have been absent the measures. In economic speak, that means that government spending will act as a drag on economic growth, rather than a stimulus.

The full report is here. At last report, the Harper government had directly cut nearly 11,000 jobs from the public service.

]]>Yesterday, NDP MP Glenn Thibeault announced his discovery that hockey helmets were not covered by the hockey-related tariff relief the Harper government had touted.

This morning, the Finance Department says this was an “oversight.”

It has been brought to our attention that hockey helmets were not included on the list of products receiving tariff relief. This was an oversight at Finance and they will be eligible for tariff relief going forward.

]]>NDP MP Glenn Thibeault has written to the chair of the standing committee on industry, science and technology to request a “study into the increased taxation of iPods and other goods.” (The full letter is here.) And, tomorrow morning, NDP national revenue critic Murray Rankin will visit Joe Momma, a bike store in Ottawa, to discuss the Harper government’s “bicycle tax.” Joe Momma was the backdrop for Finance Minister Jim Flaherty’s announcement of C-45, last year’s second budget implementation bill.

In responding to the NDP’s motion in this regard yesterday, Shelly Glover, parliamentary secretary to the Finance Minister, bravely ventured there were no tax increases contained in budget 2013.

The NDP has made up all this fearmongering dialogue about tax increases in budget 2013. There are no tax increases in budget 2013.

Somewhat similarly, Heritage Minister James Moore, responding to a question on this from Justin Trudeau this afternoon, ventured that “if we were raising the taxes the Liberals would be all for it.” Otherwise the government’s defence seems to be three-fold: assert that theirs is a “low tax plan,” claim a desire on the part of the opposition to raise taxes and allege that to not raise tariffs would be to give special treatment to China.

]]>The New Democrats have released the motion they’ll have the House debate on Monday.

“That this House condemn the tax hikes introduced by the government in Budget 2013 on hospital parking, bicycles, baby strollers, coffee makers, iPods and other goods and services, which break the promise the Government made to Canadians during the last election.”

]]>Yesterday evening, after CP reported that Sony was concerned about the tariff requirements on iPods, I emailed the Finance Minister’s office to ask if there was any response.

Tonight, the Finance Department sends along the following response.

“iPods and other MP3 players have come into Canada duty free in the past under 9948. iPods and other MP3 players continue to be eligible to come into Canada duty free under 9948 in the future.”

Both CP and Mike Moffatt have reported that sellers must obtain a certificate from the final consumer to qualify for the exemption under 9948. I’ve asked the Finance Department to confirm that and will post the response as soon it is received.

I have just learned that Sony has already paid an iPod tax on a number of their Walkman MP3 products including their Sony 2GB Wearable MP3 Player (NWZW262B). These items entered the country under 9948.00.00, but were re-assesed after the fact, as Sony could not produce end use certificates.

]]>http://www.macleans.ca/politics/ottawa/the-ipod-tax-the-finance-department-responds/feed/20The Great iPod Tax Crisis of 2013http://www.macleans.ca/politics/ottawa/the-great-ipod-tax-crisis-of-2013/
http://www.macleans.ca/politics/ottawa/the-great-ipod-tax-crisis-of-2013/#commentsTue, 09 Apr 2013 20:31:13 +0000http://www2.macleans.ca/?p=369766How the cost of an iPod became the signature issue of the budget

]]>Last week, Mike Moffatt suggested that the tariff increases introduced in the budget would result in an increase in the price of iPods. The Harper government claimed otherwise. The Globe and Mail subsequently retracted Mr. Moffatt’s original post. And then Moffatt penned a second post to explain his perspective.

I take the Finance Department at its word that iPods have been imported using the 9948.00.00 code, but am uncertain how the CBSA came to this decision in light of the precedent set by the Jam Industries case.

It is hard to believe that on further scrutiny – especially given the potential future tariff implications that didn’t exist before the budget announcement – the CBSA would be able to justify a 9948.00.00 classification for iPods. This certainly warrants further review and clarification by the government, so that importers and consumers can have greater comfort about where they really stand.

The federal government is tightening up tariffs on imported products such as televisions and iPods that receive a special exemption when used with computers. Importers owe about $16 million from 2011 alone due to a reassessment of customs duties, according to a memo from the Canadian Border Services Agency, released under the Access to Information Act and obtained by The Canadian Press.

The memo from March 2012 — which includes a handwritten notation to keep “the minister” informed — says the crackdown “will likely result in a significant amount of customs duty being reassessed, and will not be well-received by the importing community.” The agency has ruled importers who use the computer exemption must get certificates from the end users — consumers, in most cases — that certify the product will be used with a computer. No certificate, no exemption, says the agency.

My position that importers cannot meet the requirements of 9948 rests on three straight-forward premises: 1. It appears that sellers of iPods and MP3s are required to collect “end use certificates” from the final consumer on each sale, and be able to present these to the CBSA if audited. 2. The 9948 requirement for “end use certificates” appears to be actively enforced by the CBSA. 3. Retailers cannot reasonably collect these certificates from consumers when they buy an iPod.

These three, put together, make retail sales of iPods and MP3 players ineligible for 9948 and therefore subject to an iPod tariff.

All of this is problematic for the Conservatives because of previous protestations like this and this and this and this and this.

Unchallenged so far are any of the other tariff increases that Moffatt has identified which will increase the price of imported bicycles, baby carriages, school supplies, wigs, USB drives, coffeemakers, rugs, paintbrushes, plastic tableware, sandals, scissors and carving knives.

Update 4:46pm. And now, via the Canadian Press, Sony claims the existence of an iPod tax.

Sony of Canada says Canadian consumers could soon face higher prices on some electronics, such as televisions and iPods, because it’s all but impossible for importers to apply for exemptions from a controversial tariff.

Mark Trylinski, logistics director at Sony of Canada, says importers are being asked to jump through too many hoops in order to qualify for a special exemption from the tariff on the popular products. Trylinski — who predicts a price spike of about five per cent — says companies may also decide the customs duties on some items mean it no longer makes financial sense to import them.

If asked, the Conservatives will tell you that they favour a smaller government that intervenes sparingly in the functioning of the market, and it’s been pretty well-established that a medium- and long-term goal of the Conservative government has been to reduce the share of Canadian GDP that is taxed and spent by the federal government. But lower taxes and lower levels of spending are not the same thing as a smaller government.

$1.4 billion in tax relief for Canada’s manufacturing and processing sector over the 2014-15 to 2017-18 period through a two-year extension of the temporary accelerated capital cost allowance for new investment in machinery and equipment. What is the problem this measure is supposed to solve? Capital consumption allowances make sense in themselves, so long as they are aligned with economic capital depreciation rates. But accelerated CCAs introduce distortions into the tax system, and introducing them only for one sector amounts to diverting capital away from where the market would send it to where the government wants it to go.

$920 million to renew the Federal Economic Development Agency for Southern Ontario (FedDev Ontario) for five years, starting on April 1, 2014. Seriously? A slush fund economic development agency for Southern Ontario?

$200 million for a new Advanced Manufacturing Fund in Ontario for five years, starting on April 1, 2014, funded from the renewed FedDev Ontario. More pork to be distributed to firms that enjoy the favour of the government.

Building on the success of the National Shipbuilding Procurement Strategy, the Government will better ensure that purchases of military equipment create economic opportunities for Canadians by developing key domestic industrial capabilities to help guide procurement, by promoting export opportunities, and by reforming the current procurement process to improve outcomes. The Conservatives can’t even be bothered to sustain the fiction that government procurement should be aimed at obtaining the best value for the taxpayer. Public money is to be spent where politicians want to see public money being spent.

Providing stable funding of close to $1 billion over five years for the permanent Strategic Aerospace and Defence Initiative, as well as providing $110 million over four years, beginning in 2014-15, and $55 million annually thereafter, for the creation of an Aerospace Technology Demonstration Program. Another example of the government providing cash to a favoured sector. (Bonus points for gratuitous use of the word “strategic.”)

$92 million over two years starting in 2014-15 to continue support for forestry innovation and market development. Because if you’ve gone this far, what possible reason could you have not to throw money around at random?

And on and on the budget goes, for page after mind-numbingly interventionist page. How is this small government?

One response might be that the spending involved is tiny, which is true enough. But the Conservative focus on government spending is misplaced as far as promoting economic growth goes. In his survey (pdf) of the empirical evidence on the determinants of economic growth, Columbia University economist Xavier Sala i Martin — one of the leading researchers in the field — concluded that:

The size of the government does not appear to matter much. What is important is the “quality of government” (governments that produce hyperinflations, distortions in foreign exchange markets, extreme deficits, inefficient bureaucracies, etc., are governments that are detrimental to an economy).

This emphasis on the quality of government — and not its size — is a crucial:

Institutions (such as free markets, property rights and the rule of law) are important for growth.

You don’t need a big government to interfere with markets, or to weaken property rights and the rule of law. The decision to forbid shareholders of Potash Corp from selling their holdings to BHP Billiton didn’t cost the federal government a dime. Nor did instructing banks to not offer lower mortgage rates. And then there’s the example of the government’s preference for the clumsy and heavy hand of regulation over more efficient, market-based approaches to reducing greenhouse gas emissions.

I don’t think it’s quite correct to say that the Conservatives want a smaller government. They seem happy to run a government that is as big and dumb as its predecessors — so long as it’s cheap.

]]>Scott Clark and Peter DeVries explain how to fix the estimates process.

Ask the President of the Treasury Board about whether spending will be going up or down in 2013-14 and he’ll tell you that it’s going down. Ask the Minister of Finance and he’ll say it’s going up. Who is right and why the conflicting answers? The Minister of Finance will likely be more accurate than the President of the Treasury Board. But why the confusion and why can’t Canadians and Parliamentarians get a straight answer?

]]>Among the most-discussed measures in last week’s federal budget was the government’s plan to create a new “Canada Job Grant.” Finance Minister Jim Flaherty said Ottawa will contribute up to $5,000 per employee—if the employer and the province both provide matching funding—for short-term skills upgrading in places like community colleges and union training centres.

Flaherty said the plan will “transform” training and touted it as a key step toward improving the chances of workers filling in-demand occupations. But does his plan target the main problem? A report from CIBC World Markets, released late last year, found that most of the jobs facing serious skills shortages in Canada require post-secondary education—including doctors, nurses and dentists, optometrists, chiropractors, pharmacists, dietitians and nutritionists, along with mining, engineering and science occupations.

The report’s author, CIBC deputy chief economist Benjamin Tal, talked with Maclean’s about the real nature of Canada’s mismatch between skills and jobs.

Q.The recent federal budget emphasized short-term training upgrades. But the jobs you said are going unfilled tend to require serious post-secondary education. Is the government focus wrong?

A.Many of them, if not the majority, of the jobs with labour shortages do require post-secondary education. Many are in the health sector. We do also need plumbers, electricians. But the vast majority need post-secondary education.

Q.Where does the sort of short-term training Finance Minister Jim Flaherty drew our attention to fit in the mix of skills shortages and surpluses that your report described?

A. It is definitely part of the solution, but it’s not the whole solution. We do need to find a way to train people, for example, in manufacturing skills that are needed in Western Canada. Those jobs don’t need post-secondary degrees. But the problem has to do with education, with coordination between universities and colleges and governments, with the decisions being made by young people.

Q.Let’s talk about the decisions young people make. You point out big shortages in health, engineering and science. Is the root of the problem that we don’t encourage enough teenagers to seriously study math and science?

A. I think there is an element of truth to that. There’s a stigma. This is a difficult field, or a field just for the few. We see, quite frankly, in universities that students who excel in math and science are people that arrive from elsewhere. You can see a big difference between somebody who graduated from high school in places like China and people who graduated here.

Q.What should be done about it?

A. If we want to attract more people to those occupations we have to enhance accessibility to those fields. This means more help, more teachers, more focus. This is not happening.

Q.You’re talking about the culture of public education. That’s a long way from the budget’s focus on getting companies interested in upgrading the specific skills of their workers.

A.I would not criticize the budget on this. But thinking this is the ultimate solution is a mistake. The problem is much more complex, and the solution is multidimensional. I would say on-the-job training is only one dimension and not the most significant dimension.

Q.It sounds good to get companies more involved in skills. But why would a business trying to make money invest heavily in training, when they might be able to, say, recruit skilled workers abroad, or poach them from another firm?

A. That’s a big question. Time will tell. Will the new federal system help? Also, you need money from the provinces, which hasn’t been agreed on. It’s not a slam dunk.

Q.It’s been a few months since you released your report on the job market. What’s the reaction been?

A. The Prime Minister said this is one of the greatest problems facing the Canadian economy. The feedback we got was unbelievable—government, private sector, universities. This is not just about those people looking for jobs and companies looking for people. To the extent that companies can’t expand because it can’t find people, that means the economy can’t expand, and therefore wages aren’t rising, productivity is not rising, and the standard of living is not rising.

Q.What policy steps would you recommend first to begin solving the problem?

A. First, need to provide young people with information. Namely, a database so you can go and see the jobs of the future and what’s needed now. That’s the easy part and it’s not expensive. Second, we need better coordination between universities and government and corporate Canada. We need to make sure that what universities are producing is more relevant to tomorrow’s labour market. If it means more grants for fields of the future, so be it. If it means reduced subsidies for occupations that are not relevant, so be it.

One of the little joys of the Harper government’s Economic Action Plan 2013 is a chart on page 298 listing “savings measures since Budget 2010.” There are a few lines listing the total value of all spending cuts from Budget 2010, a few for Budget 2011, a few for Economic Action Plan 2012 and some more for Economic Action Plan 2013. There is much to consider in the chart, but perhaps the most interesting is the news that the government of Canada no longer publishes an annual budget. In fact, it seems to have stopped two years ago.

I work in Ottawa and I try to stay on top of things, but this was news to me. In fact, I didn’t even notice it until four days after Finance Minister Jim Flaherty released his—er—plan on March 21. Of course, there was much chortling in the press gallery at the government’s insistence on calling its annual account of revenues and expenses something besides a budget. But the significance of the thing took a while to sink in. Flaherty and his boss, Stephen Harper, do not call their big annual document a “budget” anymore because it is no longer a budget.

A budget, as anyone who has tried to run a household knows, is the moment when you stop telling yourself soothing tales and inject a note of reality into your life. On page 64 of the 1997 budget, for instance, the government of the day gave us an “outlook for program spending” with multi-year projections for spending levels in defence, Aboriginal programs, “business subsidies” and so on. It was that straightforward.

Harper’s Economic Action Plans, by contrast, are carnivals of fantasy. EAP13— we will use the government-approved hashtag, which I assume is pronounced to sound like a shriek of terror—is 200 pages longer than Budget 1997 but finds no room for a one-page program-spending outlook, nor indeed for a program-spending outlook of any length. Like the best funhouses, this one depends on its volume for much of its amusement value. The decision to merge CIDA into the Foreign Affairs Department is announced on the 31st page of a chapter on “supporting families and communities,” and I can only assume it is there as a reward for perseverance. The morning after Flaherty’s speech, a diplomat asked me how it is possible for a G7 country to release a budget that does not at any point say how much the government will spend on defence next year. I gave the fellow a long answer. I should have said his premise was wrong, because—stop me if you’ve heard this— it’s not a budget.

Not only does the budget not say what the government is spending, it does not say where it plans to stop spending, because that, too, would spoil the fun. Scott Clark and Peter DeVries, former senior finance-department bureaucrats, spotted another Easter egg tucked away on page 226 of EAP13: “The Government will introduce legislation as needed to consolidate operations and eliminate redundant organizations.”

This is not mere talk. Last year’s EAP closed the Rights and Democracy agency and the National Roundtable on Energy and the Environment, and the shutdowns did not stop there. My colleague Aaron Wherry has been keeping tabs on our website on what he calls “the quiet cuts.” In February, the Coast Guard station in Kitsilano, B.C., and eight Veterans Affairs offices closed. In October, nearly 100 employees at the National Research Council were told they may no longer be needed. Water-quality sampling in the North has been reduced, as has Via Rail staffing, emergency preparedness, the Federal Tobacco Control Strategy and programs to rehabilitate young offenders. The Kluane Lake Research Station in the Yukon is closing. There are dozens more examples. Not only are most of these cuts not announced, the government works hard to keep news of them from escaping. While Flaherty was playing his annual shell game in the Commons, Kevin Page, the parliamentary budget officer, was spending his last week in that job in court, trying to get details of the previous round of cuts. Page’s term ran out a few days later; the government no longer has to worry about him.

After the 2012 EAP, there was a good deal of grumbling among Conservatives, including some I know who have sat behind the Prime Minister in the Commons. What the hell is this? they said. We fought and waited and bit our tongues for a decade so we could have a Conservative majority in this country, and we get so little for it? This year, there is less such internal grumbling, at least over budget questions, because Harper’s caucus is on to him: just because he doesn’t announce a conservative agenda doesn’t mean there is none.

Though the title of Flaherty’s annual show changes, one feature remains constant. Direct federal program spending has been held flat in real-dollar terms since 2010, which means that, as the economy grows and programs become more expensive to deliver, there is an inevitable pressure to cut. The result is the federal government’s gradual retreat from Canadian public life. It’s really gradual, but it is starting to be the hallmark of Harper’s career at 24 Sussex Drive.

There is a constituency for that direction. Millions of Canadians have had enough of governments deciding every problem needs more government. I believe that if Harper announced, explained and defended his agenda in detail, he would find much support. But that has never been how he rolls.

If there is a place where reporters gather for information, it is never long before Harper starts to wonder why they are allowed to gather or be given information. In 2004, he asked his staff why he should have dozens of reporters following him on planes and buses as he campaigned. (By 2011, he had found his answer: as long as they were kept on the bus, he could go about his business elsewhere and they would not bother him.) In 2006, he closed the corridor outside the cabinet room so we could not wait there to ask his ministers questions. It has been years since he gave a news conference on Parliament Hill without a visiting foreign leader beside him to take half of the very few permitted questions. [UPDATE: That’s wrong. He gave a particularly robust press conference in December to announce his CNOOC-Nexen decision. — pw]

By 2011, many of his problems had to do with details of spending, either real or proposed: on F-35 jets, on baubles in Tony Clement’s riding during the G20 summit, on the cost of criminal-law enforcement. And yet every year, dozens of reporters streamed into an Ottawa conference centre to learn details of Harper’s plans on just such sensitive files. It was only a matter of time before the temptation to lead the gallery on another wild goose chase became overwhelming.

Harper has never been fond of fair fights, because he believes a cabal of Liberal-sympathetic reporters and academics and professional groups will ensure he never gets to fight a fair fight. He prefers to be judged on results, dimly understood, much later, after he has done what he came to do. The problem is that, while he is making it hard for Kevin Page and Paul Wells to find out what is happening to your tax dollars, he is making it hard for you, too. If you trust him, no problem; but you are just going to have to trust him, because there are fewer and fewer mechanisms that allow us to verify.

In January, Harper took members of his caucus to an Ottawa movie house to see Steven Spielberg’s biography of Abraham Lincoln, which features Daniel Day-Lewis as the 16th U.S. president lecturing his cabinet: “I am the president of the United States of America, clothed in immense power. You will procure me these votes.” A Canadian prime minister has more power, in his modest sphere, than an American president. The votes Harper needed were procured for him on May 2, 2011. He will seek some more votes in 2015, and in the interim, we are left to guess.

]]>Megan Leslie stood to plead confusion. Within the budget, she said, were tax increases. But the Prime Minister, she recalled, had promised not to raise taxes. So why, she wondered aloud, had the Prime Minister allowed the Finance Minister to contradict him?

The Prime Minister again insisted on talking about the NDP. “Mr. Speaker,” he said, “I know very well that the NDP favors higher taxes and taxes to finance larger deficits and higher expenses.”

Ms. Leslie was unimpressed. “Mr. Speaker, I understand why the government’s backbench is frustrated,” she responded. “Answers like that have been frustrating me for quite some time.”

The New Democrats laughed.

This is, most immediately, Ted Menzies’ fault. It was the minister of state for finance who yesterday pronounced that there were no tax increases to be found in last week’s budget. More specifically, he said “no one would find” tax increases in this budget. As a wager, this was a poor one. As a challenge, it had the unfortunate quality of having already been met—Mr. Menzies making it in response to a question about tax increases that had been found in the budget.

“The truth here is clearly spelled out in black and white on pages 331 and 332,” Ms. Leslie explained. “This is not a make-believe tax, unlike the kind that the Conservatives love to accuse us of; these are billions in actual new taxes that will impact real people.”

Ms. Leslie raised her eyebrows. “With all these half truths,” she wondered, “can the Prime Minister not understand why Canadians are angry and his backbench is frustrated?”

Of course, one cannot, or should not, blame Mr. Menzies for trying. Given his government’s adamant opposition to taxation, he likely felt compelled to at least attempt to keep up appearances. If anything, he was only denying explicitly what the government otherwise now denies implicitly. His mistake, you see, was merely acknowledging the complaint registered.

“Mr. Speaker, we will have a vote on the budget tonight, a budget that has been very well-received by Canadians,” Mr. Harper more expertly replied this afternoon. “I know we will have very strong support on this side of the House. I hope members on that side of the House will finally give up these attempts to convince people they would somehow be better off with higher taxes, somehow be better off at raising tax rates on employers, somehow better off by hiking the GST back up to 7%, somehow better off by making a carbon tax at $20 billion. The OECD and others have recognized that Canada is on the right track balancing our budget, keeping our debt low and keeping our taxes down.”

Alas, the New Democrats were not yet done displaying their reading comprehension skills.

“After promising no new taxes, pages 331 and 332 of the budget had, in fact, a long list of tax increases. There are increases to credit unions, new taxes on safety deposit boxes and a $1.1 billion tax hike on imported consumer goods,” Peggy Nash reported to the House. “Now that the minister of state has had 24 hours to reflect on yesterday’s answers, would he now acknowledge that he was wrong and admit that the budget included new tax hikes?”

Over then, again, to Mr. Menzies.

“Mr. Speaker,” he said, “I congratulate the honourable member for getting up to page 331 of the budget.”

Perhaps this was meant to mock Ms. Nash, but perhaps Mr. Menzies was genuinely impressed, having not yet gotten that far himself.

“What I would like to say is that the fact is, and let us let the facts answer this question, since 2006, we have actually eliminated 1,900 different tariffs,” Mr. Menzies now boasted. “What has that accomplished? That has provided $525 million in tax relief every year since then.”

And that, apparently, was just a bit too much relief.

“That is what we do with taxes. We lower them,” Mr. Menzies explained, now apparently championing cognitive dissonance as a governing philosophy.

Now it was Ms. Nash who was unimpressed.

“Mr. Speaker, I guess girls can cook, but they cannot read budgets,” she shot back, sticking with this week’s other theme of offence taken.

The New Democrats applauded Ms. Nash’s umbrage.

“Canadians can go and check for themselves in pages 331 and 332 of the budget. All the new Conservative taxes are laid out there,” she repeated. “Yesterday, the minister claimed that no one would find tax increases in this, yet we have found plenty of them. Let me try a specific example. Could the Minister of State for Finance acknowledge that the budget raises taxes on life insurance?”

]]>“You know, there’s two schools in economics on this,” Mr. Harper once said, “One is that there are some good taxes and the other is that no taxes are good taxes. I’m in the latter category. I don’t believe any taxes are good taxes.”

“I give you my word: As long as I will be prime minister … there will be no new taxes,” Mr. Harper had said two years before that.

Perhaps that was merely a commitment to refrain from inventing entirely new taxes that had not previously existed. But otherwise it is to wonder if the Prime Minister was a touch disappointment when he opened the budget book last Thursday and found that, not only hadn’t the Finance Minister eliminated all taxes, but he’d seen fit to budget for several increases in the cost of civil society. If he was heartbroken to read as much, it is surely a testament to Mr. Harper’s commitment to party loyalty that he has not yet gone rogue and pronounced the budget to be unworthy of his support.

As it is, it must have been rather odd for the Prime Minister to have to stand in his place this afternoon and defend such a document.

First for the opposition this afternoon was David (Furious D) Christopherson, the NDP deputy whose floppy hair has a way of bouncing in time to his indignation.

“Mr. Speaker, the Conservatives are having a hard time defending their budget. They cut infrastructure, but pretended it is new spending. They cut millions in provincial skills training, but pretended it is new money. They leaked information about a small tariff reduction on hockey equipment then turned around and actually raised tariffs by over $300 million,” he declared, holding his thumb and index finger near each other to demonstrate the concept of small. “A tax hike on almost everything. Why the shell game? Why will the Conservatives not tell Canadians the truth about the budget?”

Mr. Harper seemed here to disagree. Or at least to believe that the general public was generally pleased with last Thursday’s presentation.

“Mr. Speaker, I note how well the budget has been received across the country,” the Prime Minister noted. “I note in particular the first issue that the member raised, the infrastructure program. This government is undertaking the largest infrastructure investment in Canadian history. That is why the budget is supported so strongly by the Federation of Canadian Municipalities.”

And so here, apparently, was a reckoning.

“Really there is a choice,” Mr. Harper declared. “Is the NDP going to vote against infrastructure once again, vote against the FCM once again, or is it going to stand with municipalities and with these infrastructure investments?”

So not only is the budget a referendum on whether you like veterans, it is also a matter of whether you support society’s tendency toward urban organization.

“Mr. Speaker,” Mr. Christopherson shot back, “the NDP will never vote for budgets that deceive the Canadian people.”

The New Democrats applauded their agreement.

“The Conservatives are even hiking taxes on hospital parking,” Mr. Christopherson continued. “Conservatives are trying to claim that hospital parking is like any other commercial parking, but it is not. These people are not going shopping. They are going to visit friends and family who are sick or dying in the hospital.”

This much is apparently reference to the budget’s promise to clarify “that commercial paid parking is subject to GST/HST when supplied by a municipality, hospital, university, public college, school or any entity established by one of these bodies.”

“The Conservatives are already raising tariffs by over $300 million,” Mr. Christopherson reminded. “Why are they adding insult to injury by also increasing taxes on hospital parking?”

Mr. Harper did not have much to say about this, except to remind everyone that his government had cut the GST and then to read a list of various industry associations who had expressed favourable sentiments about the most recent budget. Later, Mr. Harper would add that the NDP “opposes job creation in this country.”

When the NDP’s Peggy Nash returned to this matter of tariffs, Ted Menzies attempted a justification.

“Mr. Speaker, as we all know, preferential tariffs were actually about 40 years old and it is a program that was used as an official aid,” he said. “What we are trying to do is actually provide a level playing field for our Canadian companies and Canadian businesses so they are able to compete. For some of the other countries that are also wanting to export, it provides a level playing field for them as well.”

So perhaps when the Finance Minister stood in the House and said, “We will not raise taxes,” what he should have said was, “We will not raise taxes, but we will provide a level playing field for our Canadian companies and Canadian businesses.” And perhaps that commitment to lower certain other tariffs, noted in the budget under the heading “Supporting Families and Communities,” should have come with an asterisk. Or perhaps there should have a section for “Not Supporting Families and Communities.”

“The fact is Conservatives are increasing the tariffs of over $300 million and even callously raising taxes on hospital parking. This budget is a tax shell game and it is hitting Canadians right in the pocketbook,” Ms. Nash shot back. “The finance minister himself has admitted he does not know what the costs will be to consumers, so why are Conservatives playing games with Canadians? Why are they pretending to lower tariffs and then turning around and raising them by over $300 million?”

Here Mr. Menzies might have been better off merely repeating his previous assurances. Instead, seeming to attempt to think on his feet, he stumbled.

“Mr. Speaker, the honourable member is talking about millions of dollars, but from what I hear from the NDP, its carbon tax alone would increase the cost of everything by $21 billion,” the minister of state responded, demonstrating precisely the sort of logic that would have the Conservatives accusing the NDP of a $1-billion tax hike had it been Finance Minister Peggy Nash who tabled the budget last week.

“I know the only way that we could ever get the NDP to support this budget is if we had tax increases in it,” Mr. Menzies continued, “but no one will find tax increases in this.”

Mr. Menzies seemed to here to put his hope in the possibility that no one—including perhaps the Prime Minister—will bother reading as far as page 325 of the budget book. But there they might find Annex 2: Tax Measures. And there they will find several numbers that are not identified as cuts, but, in fact, the precise opposite.

]]>The NDP wants the RCMP to investigate the leak of a particular item ahead of the budget’s release last week.

I am writing to you about potentially criminal actions related to a breach of budget secrecy. Details appeared in the media of new tariff cuts on hockey equipment, details which were officially released in the budget document at 4:00 pm on March 21, 2013. The information released was outlined in a Globe and Mail article by Steven Chase and Bill Curry on March 20, 2013. The article described the tariff cut as part of “a pilot project to see whether the money the government loses in customs revenue is recouped in sales tax.”

The leak and availability of this information, prior to it being made public in the budget, gave those with this information an opportunity for personal financial gain.

The New Democrats cite the most famous of budget leak precedents: the Doug Small case (see here, here, here and here for the details).

Budget secrecy is enough of a tradition that it is explained in the official guide to House practice and procedure. But the need for secrecy is obviously not absolute.

Three years ago, the CBC proclaimed the “demise of the secret budget.”

The Conservative government is taking a novel approach to secrecy concerning the January budget: it is announcing everything ahead of time. So far, Canadians know the federal deficit will be about $34 billion in the next fiscal year and $64 billion for the next two years. There will be $7 billion in public works spending, $1.5 billion for jobs training, $2 billion for social housing and a raft of permanent income tax reductions, likely aimed at the middle class…

Indeed, the new approach in Ottawa could mean that measures such as the electronic encrypting of budget documents at the Department of Finance and the slightly-demeaning escorting of reporters to the washroom by security officials during the budget lockup will be relegated to the dustbin of parliamentary history. None too soon, say some Ottawa watchers. “[Budget secrecy] hasn’t mattered in 10 years,” said one former finance official who has been involved with past budgets.

Last year, Fisheries Minister Keith Ashfield claimed budget secrecy kept him from discussing cuts to the Department of Fisheries with the government of Newfoundland before the budget was tabled.

The idea that the information might have been used for personal financial gain perhaps attempts to draw a line between benign leaks and bad leaks.

]]>Perhaps the biggest unanswered question about the budget Finance Minister Jim Flaherty tabled last week was how he planned to cut a whopping $4 billion out of the government’s operating expenses in the coming year. As it turns out, though, that might just be the easiest part of Flaherty’s budget-balancing task ahead.

The planned cut in question falls under the heading “direct program expenses,” which means it’s a saving that must be found in what Ottawa spends directly, not what it transfers to people and provinces. After posting $80.5 billion in operating expenses in 2012-13, Flaherty’s new budget allows for just $76.5 billion in 2013-14. And “Economic Action Plan 2013,” as he likes to call the budget, offers scant detail on what is to be slashed to achieve this $4-billion reduction, which led one columnist to say the budget plan shows operating costs “magically dropping” and another reporter to call the cut “something of a mystery.”

I was mystified, too. But my curiosity was not so much about how the government intended to make the deep cut called for in 2013-14. I was more perplexed by how it ever managed to spend $80.5 billion on operations in 2012-13. After all, Ottawa’s annual operating expenses have been running three or four billion below that level in recent years. In his 2012 budget, Flaherty had projected 2012-13 operating expenses of $76.8 billion. In other words, the numbers in last week’s fiscal blueprint appeared to show, not only that the government was setting out to cut deeply in 2013-14, but that this was coming after it badly overshot its 2012-13 operating spending target.

As is so often the case, however, those raw numbers don’t tell the tale. I asked the finance department for an explanation. They gave me one today by email. In fact, the lion’s share of that surprising increase in 2012-13 operating spending comes from just two items that won’t have to be repeated.

Firstly, Flaherty booked $2.4 billion to reflect an unanticipated rise in the federal liability for decommissioning and waste management at Atomic Energy of Canada Ltd. Secondly, he tallied a $1.1 billion cost after the government lost a court decision, which it decided not to appeal, that compeled an increase in disability benefits for military veterans. “Once these two revisions are accounted for,” the finance department said in an email, “the change in projected operating expenses between 2012-13 and 2013-14 is largely in line with the change reported in Economic Action Plan 2012.”

So instead of foreshadowing a magical, mysterious $4-billion cut, the operating expenses story in Flaherty’s new budget is pretty much about holding steady. Yet this changes the early narrative of Budget 2013 more than a little. If a sudden, deep cut in direct program spending was required for 2013-14, then the government would be taking the arguably risky step of imposing fresh austerity in the face of slower-than-expected economic growth. Remove that $3.5 billion in one-time AECL and veterans’ pensions costs from the balance sheet, and direct program spending is actually slated to notch up—only slightly, but still up—in 2013-14.

Or look at the revised picture in terms of eliminating the deficit. The budget says the 2012-13 deficit will come in at $25.9 billion; Flaherty promises to shrink that to $18.7 billion in 2013-14, or by $7.2 billion. Considering that the one-time-only AECL and veterans’ pension costs ballooned the 2012-13 deficit by $3.5 billion, Flaherty looks to be starting 2013-14 nearly halfway down the track to his deficit goal for the fiscal year.

]]>The Finance Minister explains why he’s increasing tariffs on more than a thousand items imported from 72 countries. The Canadian Press explains the details.

The impact on Canadians will likely be higher prices on a wide range of goods, including imported food. Some examples include an increase on the tariff on bicycles to 13 per cent from 8.5 per cent; venetian blinds to 7 per cent from 3 per cent; table fans to 8 per cent from 2.5 per cent; tableware to 6.5 per cent from 3 per cent; umbrellas to 7 per cent from 5 per cent, and potato starch to 10.5 per cent from 5 per cent.

According to the government’s own calculations, the elimination of duties on sports and baby clothes will cost $76 million a year, but it will gain $333 million annually by its other measure. “They are basically giving us a dollar and taking back five. It’s a bit of a shell-game,” Moffatt said.

The Harper government expects to take in $1 billion more in revenue as a result.

If the New Democrats were proposing this, the Conservatives would almost certainly—using the same logic they’ve employed to deem the NDP’s cap-and-trade proposal a “$21-billion tax”—describe this as a $1-billion tax.

Mr. Flaherty promised in his budget speech that the Harper government would not raise taxes.

]]>Budget 2013 is a quiet-seeming document with outsized ambitions: it seeks to reconnect skills to jobs, fund a new generation of rods and bridges, give the industrial heartland a boost and maintain Canada’s increasingly rare brand advantage as a reasonably functional Western economy. Jim Flaherty must have hoped his job would be getting easier by now. No such luck. How’d he do? Here’s the verdict from the Maclean’s Ottawa bureau:

]]>http://www.macleans.ca/politics/video-the-2013-budget-deconstructed/feed/0Budget briefing: A recap on the Morning After Budget Dayhttp://www.macleans.ca/general/macleans-live-the-ottawa-bureau-talks-about-the-federal-budget/
http://www.macleans.ca/general/macleans-live-the-ottawa-bureau-talks-about-the-federal-budget/#respondSat, 23 Mar 2013 10:00:50 +0000http://www2.macleans.ca/?p=362713Get the inside story on all the highlights, and how Budget 2013 will touch Canadians

Paul Wells, our political editor, will kick things off with introductory remarks. We’ll then hear from John Geddes, our bureau chief; Aaron Wherry, our parliamentary reporter; and Stephen Gordon, a regular contributor who’s a professor of economics at Laval University. Following that, the floor will open to questions for the remainder of the hour. Keep tabs on all the insight right here, where Nick Taylor-Vaisey will fill a liveblog with as many details as possible. It’ll be like you’re right there with the bureau.

Power & Politics spoke with Foreign Affairs minister John Baird, who said that bringing CIDA into the Foreign Affairs umbrella is a more streamlined approach to the conduct of foreign policy, as humanitarian assistance is part of foreign policy, and it brings all of the experts under one roof. Baird said that the move wasn’t too controversial, and that the department already has two parts and two ministers, the other being international trade, so a third won’t be a big change. In response, Chris Hall spoke with Julia Sanchez, President of the Canadian Council for International Development, and former Foreign Affairs minister Lloyd Axworthy. Sanchez said that they have been calling for a stronger CIDA, but that they are not convinced this is the right time for such a move because there is no clear policy direction in place. Axworthy said there needs to be a more integrated relationship between trade, development and diplomacy, as the world is not divided into silos. On Power Play, Anthony Scoggins, Director of International Programs at Oxfam, said that while he buys into the efficiencies argument, he fears that there will be less of a focus on the reduction of poverty.

Budget reaction:

To get reaction to the budget, Power Play had an MP panel of Kellie Leitch, Peggy Nash and Scott Brison. Nash said that if you want to reduce the deficit, don’t bring in austerity and don’t ignore infrastructure, and said that the lack of hard numbers in the document means we don’t know what the budget really means. Brison said that it is hard for the government to preach austerity when they protect ideological islands of profligacy, and that there are real issues with youth unemployment and $1 trillion in student debt. Leitch noted that the budget was developed after extensive consultation.

Shawn Atleo:

Chris Hall got budget reaction from AFN National Chief Shawn Atleo, who said that the document falls far short of what is required to transform the lives of his people, and the relationship with the government. While he was pleased that were more references to First Nations than ever before, there was not enough money for their infrastructure needs – $7 billion for water infrastructure alone – and the commitment to education needs to be seen with action. When asked about the training programs described as ‘workfare,’ Atleo said that chiefs have been advocating for measures like these, but the policy response was done unilaterally, and the opposition was now telling them how to feel about it. Atleo said that First Nations need to be in the driver’s seat, and that a fair share of resources would reduce amount of pressure being felt in the budget cycle.

Worth Noting:

In his last interview as PBO, Kevin Page told Don Martin that he has no regrets and would do it all over again.

NDP House Leader Nathan Cullen used his second supplementary during Question Period to question the Conservative government’s long-term commitment to infrastructure renewal. Foreign Affairs Minister John Baird replied by touting the government’s plan and referring to kind words from the Federation of Canadian Municipalities.

]]>http://www.macleans.ca/politics/the-qp-clip-nathan-cullen-demands-answers-on-infrastructure-funding/feed/0What now for Jim Flaherty … and other questions of the dayhttp://www.macleans.ca/politics/ottawa/macleans-view-from-the-hill-how-will-the-government-balance-the-budget-by-2015/
http://www.macleans.ca/politics/ottawa/macleans-view-from-the-hill-how-will-the-government-balance-the-budget-by-2015/#commentsFri, 22 Mar 2013 19:10:09 +0000http://www2.macleans.ca/?p=363857Our View from the Hill with bonus cameo by Stephen Gordon

]]>Just before QP this morning, Conservative MP Scott Armstrong explained how the budget should be viewed.

Mr. Speaker, I rise today on behalf of the veterans and legions across my riding to thank the Prime Minister and the Minister of Finance for increasing the funding envelope of the last post fund. The last post fund is the fund we use to show respect to our veteran soldiers, the ones who fought at Juno, Normandy, the ones who fought in the jungles of Burma, the ones who liberated millions of Europeans in World War II, a generation that is coming to the end of their lives. Our government has answered their ask to respect them by increasing the last post fund from $3,600 to help and support their families with the funeral to $7,300 to help their families and support them with the funeral.

We need to show these veterans respect, both in life and in death. Our government has answered that call. I call upon the opposition to stand and vote in favour of this budget. If it votes against budget 2013, it will be voting against every veteran across our country.

Opposition MPs have been pressing for changes to the Last Post Fund and the Royal Canadian Legion has campaigned for improvements. In its response to the budget, the Legion celebrated the increase to the Last Post Fund, but also noted other concerns.

Of course, as a young Reform MP once noted, the trouble with omnibus legislation (of the sort that has been used to implement the budget over the last several years) is that it forces MPs to give a single answer to many different questions. So perhaps Mr. Armstrong will ask the Finance Minister to ensure that the increase in funding for the Last Post Fund is made a separate and distinct bill so as to ensure that no votes are cast against the nation’s veterans.

Flaherty’s office won’t say yet whether the budget proposals will be stuffed into another omnibus bill, an unpopular tactic with opposition parties and Canadians who want MPs to spend more time reviewing key measures separately. Highly controversial changes to how bodies of water are regulated, for example, did not come to light until the actual budget bill was tabled last year.

“I’m getting used to the modus operandi of Stephen Harper and it makes me feel that nothing can be said about this budget until we see this implementing legislation,” said Green party Leader Elizabeth May. “Until we see if we’re facing another omnibus bill, one that we fear will take an axe to the Species at Risk Act, we have to wait and see.”

]]>http://www.macleans.ca/economy/business/slideshow-a-history-of-federal-revenues-and-expenditures/feed/1Ottawa prepared to go it alone on securities regulatorhttp://www.macleans.ca/news/ottawa-prepared-to-go-it-alone-on-securities-regulator/
http://www.macleans.ca/news/ottawa-prepared-to-go-it-alone-on-securities-regulator/#commentsFri, 22 Mar 2013 10:16:23 +0000http://www2.macleans.ca/?p=363558OTTAWA – Finance Minister Jim Flaherty is sending out a notice that he is prepared to go it alone on establishing a national securities regulator if provinces won’t agree.
The…

]]>OTTAWA – Finance Minister Jim Flaherty is sending out a notice that he is prepared to go it alone on establishing a national securities regulator if provinces won’t agree.

The declaration is contained in a two-page notice in the 2013 budget, informing the provinces that Ottawa still seeks a co-operative approach with the provinces, but it won’t wait forever.

“If a timely agreement cannot be reached on a common regulator, the government will propose legislation to carry out its regulatory responsibilities consistent with the decision rendered by the Supreme Court of Canada,” the budget states.

The last time Ottawa tried to move ahead with a national regulator, several provinces led by Quebec and Alberta fought to stop it from intruding in provincial authority.

The Supreme Court agreed with the provinces, but left Flaherty an opening by ruling that Ottawa has a role in matters of national importance and scope, including preventing systemic risks in the financial system.

In the budget statement, the government said it was prepared to delegate the administration of its own securities legislation to a national regulator “if a critical mass of provinces and territories were willing to do the same.”

But if an “timely agreement” cannot be reached, it would go ahead with legislation dealing with its areas of jurisdiction as defined by the court.

“This will include the capacity to monitor, prevent and respond to systemic risks emerging from capital markets,” it said.

“A federal capital markets regulatory framework would be applied consistently on a national basis and would not displace provincial securities commissions, which would still manage the day-to-day regulation of securities activities.”

It gives no time limit for an agreement, but in the meantime it is extending the mandate of the Canadian Securities Transition Office to work on the project.

Flaherty has been trying to establish a national regulator almost from the first day he became finance minister, only to be frustrated at every turn by provincial objections and most recently by the courts.

He has pointed out that Canada is the only major industrialized country without a single regulator, increasing costs to businesses seeking to raise money in Canada and making enforcement and prosecution of fraud more difficult.

]]>Stopping by the House of Commons on his way to China, Jim Flaherty received the customary ovation afforded a finance minister upon him arriving to deliver the budget. He received another standing ovation when he stood to table the four books that apparently comprised this year’s Action! Plan!

The Conservatives did not stand to applaud again for another 400 words. Until precisely this.

“Much of what I announce today is aimed at making this country an even better place to raise a family, to work and to establish a business. But, before I proceed, I need to make one thing very clear,” Mr. Flaherty explained. “And it is simply this: Our government is committed to balancing the budget in 2015.”

The Conservatives cheered. And a couple dozen of them stood again a few moments later when he restated it.

“We will not back away from our steadfast commitment to fiscal responsibility,” Mr. Flaherty vowed. “We will not balance the budget on the backs of hard-working Canadian families or those in need. But we will balance the budget. And we will do it in 2015.”

As Scott Clark and Peter DeVries have noted, this promise has the odd quirk of being unverifiable until after the next election. The Harper government can say now that it will balance the budget by 2015 and it might even present a budget in 2015 that demonstrates as much, but not until 2016 will anyone be able to say for sure whether the federal budget has actually returned to black.

But no doubt the Conservatives very much want this commitment to come true. With the Prime Minister having said the government would never go into deficit and with the government having created a structural deficit and with the Finance Minister having wagered on various surplus horses, the Conservatives—they, at least nominally, being conservative—must dearly wish to have these large red numbers out of the way.

So how will the Harper government go about doing what the Conservative caucus is apparently quite excited to do? Good question.

Mr. Flaherty was eager to explain all of the things the Conservatives would not do.

“We will not put the future of Canadian families at risk,” he allowed.

“We will not waver from our commitment to create jobs and fill jobs for Canadians,” he declared.

“We will not spend recklessly,” he guessed.

“We will not reduce transfers… transfers to individuals, children and seniors… transfers to provinces and territories for critical services like health care and education,” he ventured.

“We will not raise taxes,” he concluded.

What does that leave for the Harper to do? Not much, apparently. Discretionary spending will not increase by too much. And, Mr. Flaherty said, the Conservatives would do their part by “looking inwards.”

“Our plan introduces measures, for example, to reduce spending on travel,” he said, “and end duplication of internal government services.”

There was not much more to say on this front. Indeed, save for a few sentences about tax loopholes, the rest of the speech was promises of new spending and further tax relief—money for training and infrastructure and machinery. There was a whole paean to bridges, inspired by Lord Tweedsmuir.

So perhaps the Prime Minister will not bother appointing another Intergovernmental Affairs Minister. Combine that cut with the savings gained by consolidating the government’s computer systems and the deficit will apparently be eliminated.

It’s just that easy. And as long as it remains that easy, 2015 will arrive and the deficit will be nearly gone and no one will have noticed much of a change except for those cabinet ministers who will have had to make due with fewer plane rides to China.

“Despite the economic issues our government has faced, we have done our very best to keep taxes low for all Canadians,” Mr. Flaherty boasted nearer to the end of his speech. “In fact, our government has introduced more than 150 tax relief measures since 2006. That’s why the average family of four is saving more than $3,200 per year in taxes.”

In the line graphs and in the nooks and crannies of our antiquated system of parliamentary accountability are the precise details of how much less. Perhaps some day soon we’ll again have a Parliamentary Budget Officer who might be able to help in the task of figuring out just what sort of “duplication” is being eliminated and what consolidation is occurring. Indeed, it is a perfect irony that on the same day the Conservatives stood and applauded the Finance Minister’s commitment to deficit reduction, the Federal Court was hearing Kevin Page’s plea to see exactly how the Conservatives were planning on fulfilling that promise.

When Mr. Flaherty was finished, the New Democrats and Liberals registered their objections—Liberal Geoff Regan daring to suggest that the Conservatives were somehow responsible for the deficit, the NDP’s Peggy Nash seeming to forgive the government the deficit for the purposes of lamenting the government’s cuts. “The deficit that we are facing was not caused by government spending,” she tried to explain. “Rather, it was the recession that caused the deficit.”

With her opportunity, Conservative MP Tilly O’Neill-Gordon chose to congratulate the “Minister of Economic Action Plan 2013” on his effort. This was possibly a slip of the Freudian variety. It is also possibly, whatever good or bad may come, Mr. Flaherty’s political epitaph.

“No one can know the future. But, from where I stand, I will say this: These seven years have belonged to Canada,” Mr. Flaherty had declared in drawing his speech to a close. The evidence is in. Our economy has been resilient. We can all be proud of that. And, I will also say this: Canada’s economic future is bright. That we have some tough times ahead, I do not doubt. No one who sees the world around us would disagree. But the plan I have presented today— Canada’s Economic Action Plan 2013—advances a solid vision that has stood the test of time. Where others have faltered, we have maintained a consistent, steady hand. Today, we move this responsible plan forward. Forward, toward that bright future. With this plan, our government renews our commitment to Canadians. Our commitment to jobs. Our commitment to growth. Our commitment to long-term prosperity. For all Canadians.”

The Conservatives stood again to cheer, this time themselves.

With the opening toast thus given, we await the budget bills and what details may or may not come.

]]>NDP Leader Tom Mulcair apparently couldn’t think of a verb for the sort of tight-spending policy he perceived in the 2013 federal budget, so he redeployed an adjective, saying, “You cannot austere your way out of a crisis.”

On Flaherty’s pledge to balance the books by 2015, the NDP leader noted that the budget assumes 2.5 per cent growth in gross domestic product next year, up from just 1.6 per cent this year, which is, in turn, well below the 2.4 per cent GDP growth projected in last year’s budget.

“His predictions are constantly wrong,” Mulcair said, adding, “”They are making a very high prediction for [GDP growth] next year to come up with their under $20 billion deficit. That will, of course, also be proven to be wrong.”

On one of Flaherty’s main new programs—a $300-million-a-year federal pool for job-training grants, which would have to be matched by provincial and employer contributions—Mulcair accused him of playing “a shell game” by funding the grant program with money that used to be transferred to provinces with fewer strings attached.

He found a few things to like. For instance, he praised the decision to give the regional development agency for Northern Ontario, known as FedNor, more autonomy as a stand-alone agency.

On his main point—the fact that the budget is misguided in trying to “austere” Canada to prosperity—Mulcair was evasive on how long a presumably more free-spending NDP budget would keep the federal books in the read. Asked how long he would run a deficit if he were prime minister, Mulcair said only, “We’re going to be responsible public administrators.”

Justin Trudeau, the prohibitive favourite to win the leadership of the federal Liberal party next month, says the new federal budget’s plan for training sets the stage for a friction between the Conservative government and the provinces over job training.

A centrepiece of Finance Minister Jim Flaherty’s budget is a plan he says will “transform” the way Canadians are trained, by establishing a new “Canada Jobs Grant.” Under the plan, Ottawa would provide up to $5,000 for an employee being trained on the job, as long as the employer and the province each put up an equal amount.

But the jobs grant plan calls for the renegotiation of existing Labour Market Agreements with the provinces in 2014. Flaherty said $200 million a year would still be earmarked for programs the provinces run on their own, like job counselling and job-hunting services, but $300 million would flow to the new grants.

Trudeau told reporters in the foyer of the House that he expects provinces to rankle against Ottawa taking a more active role in training—especially since Harper hasn’t met formally with the premiers since the fall of 2008.

“We have a government that over the past number of years has completely removed itself from any sort of productive relationship with all provincial premiers,” he said.

In fact, Harper’s disinclination to hold First Ministers’ meetings is only part of the story of often chilly relations between his government and the provinces. For example, Flaherty stunned provincial finance ministers at a meeting in Victoria in late 2011 by delivering major changes to health transfers without inviting any negotiations on the matter.

Given that history, Trudeau suggested the Conservative government will find the provinces suspicious of the new training scheme. “We have a situation where they are hinging an awful lot on a capacity to do something they haven’t been very good at over the past years of their mandate, which is figure out to work with the provinces to the benefit of all Canadians.”

Early reaction had some provincial politicians voicing criticism of the federal jobs grants concept. Ontario Finance Minister Charles Sousa says he feared provinces will lose flexibility over how they spend federal transfers for training.

]]>The Conservatives’ “starve the beast” strategy of reducing the size of the federal government is one of gradual erosion and not dramatic cuts, so it’s only noticeable if you revisit the process at regular intervals, like time-lapse photography. Here is the history of federal government revenues and expenditures as a share of GDP:

Federal government revenues have been at record low levels — less than 14.5 per cent of GDP — for the last four years, and they are projected to remain there. The strategy for eliminating the deficit is to keep expenditure growth below that of GDP so that its share of GDP declines over time. But this approach is not applied across the board. For example, transfers to persons (elderly benefits, children’s benefits and the like) are politically sensitive, and cuts here could provoke broad-based opposition. So the plan in this budget — and the ones that preceded it — is to limit the growth of these transfers to the rate of growth of GDP. In other words, transfers to persons as a share of GDP is projected to converge to a constant level:

The same goes for transfers to the provinces:

If you combine this strategy with the downward revisions to the Department of Finance’s GDP projections, you get the cuts in the projected path of transfers to the provinces that are in this year’s budget.

If transfers to persons and transfers to other levels of governments are schedule to rise with GDP, then direct program spending must fall as a share of GDP. The way this is done is by holding nominal spending constant: its share of GDP declines as GDP increases:

Not only do these lines slope down, they get steeper with every budget. The jump in the current budget in 2012-13 is due to an accounting change: some measures that had previously been classified as tax expenditures have been reclassified (properly, in my view) as part of regular spending. But this is simply a one-time level shift; the trend to steeper profiles continues. The 2012 budget projected a decline of one percentage point between 2013 and 2017; the decline projected in this year’s budget is 1.1 percentage points.

The Conservatives are often accused of having a secret agenda on certain policy fronts, but they certainly can’t be accused of having a secret agenda about what they have planned for the size of the federal government. Their agenda has been published in every post-recession budget, and it will be published in next year’s budget as well.

]]>Our bureau spent eight hours behind closed doors, poring over hundreds of pages that comprise Budget 2013, which Finance Minister Jim Flaherty introduced in the House of Commons this afternoon. Here are the bureau’s rapid-fire thoughts on what it all means.

John Geddes, our bureau chief, on Finance Minister Jim Flaherty’s effort to recover his reputation as a fiscal conservative.

Paul Wells, our political editor, on why the Conservatives hope 2013 is a very boring year.

Stephen Gordon, a regular contributor to Maclean’s and professor of economics at Laval University, on why the budget represents the status quo.

This budget marks a tactical retreat by a chastened government whose recklessness a year ago bought it a year of trouble it did not want.

Advisors to Stephen Harper say most big departures from business-as-usual in his government come straight from the big guy. This includes both the exploits of diplomacy and the excesses of bitterness. His budget last year was an example of the latter Harper. My blog post a year ago called it a Very Political Budget: the document sought to institutionalize Harper’s sense of outrage at Barack Obama’s decision to delay approval of the Keystone XL pipeline project. That delay was announced in November. By December Harper was promising “major transformations” and a shift in Canada’s trade strategy from the U.S. to Asia. In January Harper visited China and delivered his Davos speech. In March the budget featured, for the first time, a chapter on natural-resource development and included language about reducing environmental protection, penalizing environmental groups that tried to meddle in resource extraction, and speeding the approval of big resource projects.

To press the point home, PMO staffers were on hand at the budget lockup for reporters, to point out the resource-export/ demonize-environmentalist parts of the big budget book.

It’s not too much of an exaggeration to say the 2012 budget was inspired by, and might as well have been written by, Ethical Oil, the oil-patch advocacy group inspired by an Ezra Levant book, and by Vivian Krause, a British Columbia blogger who spins tales of foreign meddling in Canada’s mineral wealth.

And what did it get Harper? A year of hellish relations with aboriginal groups; a possibly fatal public-relations cloud over the Keystone project, based precisely on the Harper government’s poor environmental record; serious opposition in Europe to any extension in Canada-EU relations at the very same time we’re trying to negotiate a trade deal; and a set of controversies that still motivate NDP supporters and the NDP caucus today, another year closer to a federal election. Meanwhile the Northern Gateway project is no closer to getting built; China remains a problematic trade partner; oil prices are depressed; and new technologies are transforming the U.S. from a ravenous energy consumer to a massive energy producer.

So much for major transformations. Today’s budget left skid marks across the Government Conference Centre lockup as Harper backtracked from almost all the most controversial elements of his 2012 budget. PMO staffers were thin on the ground at today’s lockup. They are in no mood to brag. Where the 2012 budget book had 12 pages on “Responsible Resource Development” and two more on “Investing in our Natural Resources,” this one has only four pages on “Responsible Resource Development,” none on “Investing in Natural Resources,” and six new pages on “Building Strong Aboriginal Communities.”

This retreat is highly characteristic of Stephen Harper. He likes the reputation he enjoys among his opponents, as a bruising fighter who single-mindedly pursues a lonely and extremist political vision. That reputation, frankly, helps him among his supporters, who wish he were that guy more often. (For all the fights the 2012 budget sought to pick with the Yankees and the environmentalists, there were a lot of hangdog expressions at Hy’s that night among Conservatives who had hoped for real small-government conservatism from a majority government and thought Flaherty had delivered thin gruel.) But in fact, Harper’s normal reaction to controversy is to seek calmer waters.

In 2005, he used the first policy convention of the then-new Conservative Party to take potentially divisive social-conservative issues like abortion off the party’s agenda. In November 2008, within 48 hours after Flaherty’s fall update sparked an opposition attempt to form a coalition that could take power from the Conservatives, Harper had sent his ministers to announce the cancellation of everything in the update that had upset the opposition — party financing, pay equity and more. It’s one of Harper’s best-kept secrets: if you push him, he steps back.

That’s because nothing matters to him more than political survival does. If he does not last he can’t do anything. If he survives he can do a little bit every year until his efforts begin to add up. This budget changes the government’s communications more than its direction. None of last year’s measures on resource extraction are cancelled, and the government has not seriously become more activist on the environment. It has simply buttoned its lip about activity that seemed worth advertising a year ago and has instead bought this government mostly trouble.

There are still surprises. Thirty-one pages into the budget chapter on “Supporting Families and Communities,” under the subhead for “Maximizing Opportunities for International Synergies” — still with us? — there are two sentences mentioning, in passing, the end of CIDA as a stand-alone government department. It will be rolled into Foreign Affairs to create a new Department of Foreign Affairs, Trade and Development.

Now it becomes clear why the government leaked all the stuff about tariff cuts for hockey equipment: it was a smoke screen.

Why survive? Why stay in power, beyond the fact that it is always more pleasant than being out of power? Our friend Stephen Gordon explains it in his own blog post tonight: because the Harper government has been able to progressively restrain the federal government’s scope and ambition for direct intervention into the lives of Canadians. Direct federal program spending is smaller, as a portion of the economy, every year. The decline is a little steeper every year. Federal taxes, as a portion of the economy, are lower than they have been for half a century. Last year Harper got too cute and he put all that in more jeopardy than he would have admitted, and a lot more jeopardy than he liked. This year he is not interested in messing around.

And next year? The first third of the budget is an ode to Canada’s sterling economic performance, based largely on comparisons to that notorious international 21st-century losers’ club known as the G7. (We’re doing better than Italy!) But at least by that palsied standard, we really are doing relatively well, and that’s better than if we were doing even worse than all those guys. So I was unsurprised to see that, after yesterday’s UK budget cut the Cameron government’s GDP growth projection by more than half, from 2.0 to 0.6, today’s Canada budget does not amend GDP projections at all.

Then I looked more closely. In fact, it’s the average for GDP growth over the next five years that is unchanged from the 2012 budget. GDP growth for this year, 2013-2014 — the year we’re actually living through — is down one-third from the 2012 projection. But growth for next year is actually projected to be up a touch.

That’s handy. We’re eight and a half billion dollars deeper in the hole today than Jim Flaherty expected to be only a year ago. But he expects the economy to get better all by itself, after it seriously didn’t get better this year. What if the incurably optimistic bank economists who were wrong about this year are wrong about next year too? Well then, Stephen Harper will need to cut billions from spending to meet the 2015 deadline for budget balance that Flaherty reaffirmed today. The big debate over government’s role that Harper sought to avoid for this year will be back, bigger than ever, just in time for a federal election.

]]>It used to be that a federal government eliminating a federal department would make a fuss about it. This one is more modest. On page 241 of the full budget document — but nowhere in Jim Flaherty’s budget speech — we find news that the Canadian International Development Agency will disappear.

The surprise comes near the end of a budget chapter on “Supporting Families and Communities,” which leads a reader to suspect it was not put there to attract attention. “The Government will amalgamate the Department of Foreign Affairs and International Trade (DFAIT) and CIDA,” the document says. While the government will maintain “a separate ministerial position” — so there will still be a development minister, as there is a trade minister — the new “Department of Foreign Affairs, Trade and Development” will benefit from “enhanced alignment” to “leverage…synergies” and “maximize the effectiveness of the resources available.”

There’s no indication either of expected savings or of transition costs for the change. Cost reductions from the resource synergy alignment, if any, will come in future years.

]]>http://www.macleans.ca/news/canada/bye-bye-cida-budget-reveals-department-to-be-eliminated/feed/8Jim Flaherty’s budget of contradictionshttp://www.macleans.ca/politics/ottawa/budget-overview-jim-flahertys-trick-plus-everything-else-you-need-to-know-about-budget-2013/
http://www.macleans.ca/politics/ottawa/budget-overview-jim-flahertys-trick-plus-everything-else-you-need-to-know-about-budget-2013/#commentsThu, 21 Mar 2013 20:30:57 +0000http://www2.macleans.ca/?p=363235Can the government be a “benign and silent partner” and still take major action? John Geddes evaluates.

The trick Finance Minister Jim Flaherty tried to pull off in his eighth federal budget was to convey the sense he is taking action while, at the same time, brushing off his old claim to being a non-interventionist Conservative who trusts the economy to do its thing.

In other words, Flaherty set out to send two messages that don’t coexist comfortably in the same budget speech. In the closest thing he attempted at a rhetorical flourish, he asserted that government should be “a benign and silent partner” to Canadians going about their economic lives “and not an overbearing behemoth squeezing them at every turn.”

Yet he also said his plan “takes action” with three major thrusts—introducing a jobs grant that he boasted will “transform the way we provide skills training,” mapping out an infrastructure program that he touted as “the largest and longest” in the country’s history, and a stitching together a new strategy for boosting business innovation.

So he announced action on those three fronts, but returned repeatedly to avowals of old-school fiscal Conservatism, all punctuated by a repeat of his key pledge to balance the books by 2015.

The reception of the budget depends on the willingness of Canadians taxpayers and voters—not to mention lobby groups—to buy the notion that a budget can simultaneously be about a “benign and silent” approach and put a trio of big items in the Tory policy window.

Arguably the boldest move Flaherty announced is his new Canada Job Grant. His starting point hardly sounded like he was identifying a problem: he touted Canada’s job-creation record as the best of the major industrialized economies, adding 950,000 jobs since the depths of the 2009 recession. Yet he went on to claim that training isn’t now giving Canadians the skills employers demand.

His solution amounts to taking greater control over billions Ottawa transfers to the provinces for skills training. When the main so-called Labour Market Agreements with the provinces come up for renegotiation in 2014, Flaherty said they will be changed so that much of the federal money goes directly to businesses.

Under the new Canada Job Grant scheme, Ottawa would pay up to $5,000 for every employee being trained, requiring matching funds from the employer and the province, for up to $15,000 per person. The federal government will funnel $300 million a year into the grants, while still providing provinces with $200 million a year that they can spend directly on services like job counseling.

The on-the-job training plan amounts to a significant federal strategic push into what has been largely a provincial domain. By contrast, Flaherty’s infrastructure plan, even though he described it as historic, looks closer to a confirmation of the recent status quo.

The plan will see the combined federal contribution toward infrastructure projects carried out by municipalities or provinces run at an average of $5.35 billion a year from 2014-15 to 2023-24, edging up only slightly from this year’s level. In other words, Flaherty guarantees something close to what federal investment levels rose to the Building Canada Plan, which began in 2007 and expires in 2014.

Flaherty’s third major push—helping companies, especially manufacturers, compete—is also built around entrenching familiar measures, rather than unveiling new ideas.

For instance, he again extended the tax break that allows manufacturers to more quickly write off the cost of buying new machinery and equipment—a move he first announced in 2007, then repeated in 2008 and 2009 and 2011. Budget 2013’s repeat of this “temporary” accelerated capital cost allowance is estimated to be worth $1.4 billion in tax relief over two years.

Another familiar measure Flaherty packaged under the heading “Helping Manufacturers and Business Succeed in the Global Economy” was to extend the life of the Federal Economic Development Agency for Southern Ontario—a new regional economic agency launched by the Harper government—to the tune of $920 million for five years. And he offered more details about the government’s new Venture Capital Action Plan, a $400-million pool of federal money meant to lure private investors into pumping more into Canadian start-ups.

Keeping on subsidizing southern Ontario businesses and wading into the venture capital game do not exactly square with Flaherty’s small-c conservative description of government’s proper economic role as “benign and silent.

But he might be counting on his deficit-elimination message to shore up his credentials as a small-government guy at heart. “Our government is committed to balancing the budget in 2015—period,” he said, adding that “maintaining a sound fiscal position” is the most important thing this government, or any, can do to help the economy.

His cannot rely only on fiscal rectitude, though, to slay the deficit by 2015. He’s counting on a healthy economy, too. The steady shrinking of the federal deficit that Flaherty projects—from $25.9 billion in 2012-13, to $18.7 billion in 2013-14, to $6.6 billion in 2014-15, to a small surplus in 2015-16—depends on no more unpleasant surprises.

Recent history isn’t reassuring on that score. A year ago, Flaherty’s 2012 budget relied on private sector forecasts to project 2.4 per cent gross domestic product growth, after inflation, for 2013. That was then: Budget 2013’s forecast is for only 1.6 per cent GDP growth.

After this year, however, Flaherty’s new budget assumes the economy will rebound back onto roughly a 2.5-per-cent a year expansion track for several years to come. By historic standards, that’s modest. But by the new norms of a world economy that features instability in Europe and uncertainty in Washington, it’s almost upbeat.

If the global climate again turns stormy, Budget 2013’s three-pronged action plan will seem inconsequential, and Flaherty’s pledge for a balanced budget by 2015 will look vulnerable. The government might aspire to being “benign and silent,” but factors beyond its control will determine if that is possible.